Nepal's struggle to strike balance between India, China

By Deepak Adhikari

KATHMANDU, Nepal

Sandwiched between India and China, Nepal, in recent years, has found itself being serenaded by its neighbors, but analysts question whether the Himalayan nation, mired in political instability, can capitalize on the newfound courtship.

Each funded by India and China, two hydroelectric projects in Nepal’s Western region illustrate the growing competition between its neighbors to invest in developing the country’s war-ravaged infrastructure.

The Pancheshwar Multipurpose Project, a 6,000 megawatt hydroelectric project on the Mahakali River on Nepal’s western border with India, which after languishing for 17 years due to political instability in Nepal, received a go-ahead after the official visit of Indian Prime Minister Narendra Modi to Nepal in August last year.

A 750 megawatt hydropower project on the West Seti River in the same region had been stalled since China’s Three Gorges Corporation signed a deal with Nepal in 2012. After the visit of Lu Chun, the chairman of the Chinese company, early this year, the $1.6 billion project is all set to begin its work this summer.

While India has for long been the most important trading partner and a key player in Nepal’s politics, China’s more recent assertion in the wake of the end of the Shah monarchy, has made Nepal a theater of geopolitical rivalry.

India shares a 1,700-kilometre open border with Nepal. For the mandarins of New Delhi and Kathmandu, the porous border is a contributor to crimes in the region, but for people living along it, the boundary is a lifeline. 

They not only cross it in search of work, but also marry across the border, establishing relations that last for generations.

At the political level, the ties have often been fraught and antagonistic. Nepali leaders cite past water-sharing pacts with India, which allegedly favor India, as examples of its high handedness.

Relations have improved following the visit of Modi last year, when he allayed the fears of the smaller neighbor by acknowledging its sovereignty and offering financial aid.

During the visit, Modi announced a concessional line of credit of $1 billion to Nepal for the country’s infrastructure development. Last year, Nepal also inked power trade agreement with two Indian firms to develop two major hydropower plants, which aim to supply power to the energy-starved country.

India has fixed its focus on the Tarai region along its border, where it is funding a postal highway and since 2004, has been donating up to 30 million rupees to village leaders, MPs or charity groups to build libraries, school buildings and hostels as part of its small development scheme.

For Beijing, Nepal serves as a gateway to the vast India market.

Nepal has agreed to be part of Silk Road Economic Belt to South Asia. Beijing is funding the construction of five dry ports along the checkpoints in the border in the Himalayan region.

In 2013, it completed a 22 kilometer road in central Nepal. The second road connecting Nepal with the Tibetan county of Kyirog is poised to become the shortest overland route between China to India.

China has also promised Nepal to extend the Qinghai-Tibet railway, which recently began operations in Shigatse, up to Nepal’s capital, Kathmandu.

Geja Sharma Wagle, a geostrategic analyst with Nepal Institute of Policy Studies, a Kathmandu-based research organization, said Nepal was well placed to take advantage of the growing interest of its neighbor. 

"Nepal is in a unique position to strike a fine balance between the neighbors. We are in a privileged position and we should capitalize on this without hurting our national interest," Wagle told The Anadolu Agency.

"Our neighbors have turned to Nepal as a strategic partner. If Nepal wants to take advantage of this interest, our leaders should form separate policies to deal with each country," he said, pointing out that both countries have chosen strategically important infrastructure investments. 

"Both have invested on airports, hydropower, road and telecommunications," he said.

Former Chinese premier Wen Jiabao stopped over in Nepal in late 2012 towards the end of his tenure, continuing a tradition of a visit to Nepal by a Chinese leader every decade. Chinese President Xi Jinping is likely to visit Nepal this year to mark the 60th anniversary of diplomatic relations between China and Nepal.

Despite being caught in one political crisis after another as it struggles to forge agreement for a republican constitution -- awaited since the end of its civil war in 2006 -- Nepal is trying to catch up with the neighbors’ overtures.

Late last month, Nepal’s President Ram Baran Yadav visited China to take part in the Boao Forum for Asia, where his Chinese counterpart Xi Jinping pledged an aid package of 14 billion rupees ($140 million) to Nepal, a five times increase in Chinese funding.

"The prosperity of smaller countries is important for China’s continuous growth and to attain political power in the world order, but that will not necessarily make all small, underdeveloped countries prosperous," wrote Bhojraj Poudel, a Beijing-based columnist on Chinese influence in Nepal.

"The prosperity of such small countries like Nepal lies in their political course and the development strategies these countries adopt," Poudel wrote in a recent column for The Kathmandu Post

For Wagle, both neighbors have zeroed in on the security sector in order to cultivate a long-term alliance.

"Both countries provide financial and technical support to the security forces including the Nepal Army. Their goals are to make the security forces loyal to them. Historically, India has been a major supplier of lethal weapons to Nepal’s national army. China seems keen to provide non-lethal aid," he said.

China has earmarked 3.5 billion rupees to build a training academy for the Armed Police Force on the outskirts of Kathmandu. Not to be outdone, India has pledged 9 billion rupees for a similar initiative for Nepal Police in Panauti, a town 20 kilometers northeast of Kathmandu.

Both countries, according to Wagle, seek to minimize the American and Western influences in Nepal and maintain their traditional sway over the Himalayan nation.

"Chinese leaders particularly think that if Western influence increases in Nepal, it will be used as a launchpad to destabilize its restive Tibetan region," said Wagle.

Tika P Dhakal, a Kathmandu-based strategic affairs analyst, warns that Nepal may miss this opportunity due to internal problems.

"Nepal has been in a state of perennial crisis after the end of Maoist insurgency in 2006. This has taken a toll on political leadership's ability to articulate Nepal's concerns vis-a-vis both India and China," he told AA.

Over the years, China’s primary concern has been the ever-increasing trade deficit with Nepal and the issue of Tibetan refugees, a 20,000-strong exile community who took refuge in Nepal after fleeing their homeland following the Chinese occupation in the 1950s.

"We might lose this historic opportunity because of political instability. Both neighbors want development without political disturbances, but we don't seem to be in a position to guarantee it," he said.

"Both countries' interests converge on infrastructure development of Nepal. Nepal wants to accommodate both the neighbors. Nepal has historically pursued a balancing act and that's the way to go," he said.